Risk

Why Companies Don't Train Workers Anymore

Employees work on the assembly line installing parts at the Ford Motor Engine Plant in Lima, Ohio on March 28

Yesterday my colleague, Matthew Philips, raised an interesting question about the skill gap, pointing to new research that claims the problem is not that workers are unqualified, but that companies’ expectations have changed: They are no longer investing resources in training their staff.

It’s not hard to see why. Training is expensive, and Philips notes that people now spend less time in their jobs, which lowers the expected return on the training investment. Craig Copeland, of the Employee Benefit Research Institute, estimates that in 1983, almost 60 percent of men (ages 45 to 49) had been at their job for more than 10 years. In 2012, only 45 percent had been. Rates of long-term tenure fell for all men under age 60.

If we want companies to revive a commitment to on-the-job-training, it’s worth asking what created our current nation of job hoppers. There are plenty of reasons, including the decline in union membership and the increased portability of benefits. The changing nature of work itself has also encouraged more frequent job changes. When jobs required unique, specific skills, training paid off; it was also harder for a worker to translate his experience into a new environment. Technology, in part, has made some skills far less specific. Take car manufacturing. According to the Center for Automotive Research, auto assembly now requires less mechanical ability and more technical skills—skills that are more standardized. Once, the skills you learned at General Motors were fairly specific to GM; now it’s easier to take them to Ford.

Skills have also become more flexible as the service industry has grown. Service jobs place a higher premium on good interpersonal skills and access to a large network—the kind of skills often developed precisely by changing jobs. A new employer, after all, also means new co-workers. In all but the biggest companies, it’s almost impossible to develop the same skills by staying in one place.

The result, though, is an example of classic economic short-sightedness. If job skills translate, companies can make the cost-saving decision to cut worker training and simply hire people with the skills they need. But if everyone makes the same calculation, we end up with a collective action problem: No one is training. The number of unfilled jobs suggest that employers’ expectations may not be realistic. More education might make up the difference, but school can rarely teach what most people learn on their first job.